Legal Services Corporation: Governance and Accountability Practices Need to Be Modernized and Strengthened Page: 7 of 81
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led to the enactment of the Sarbanes-Oxley Act of 2002. Public companies7
now operate under strengthened governance and accountability standards,
including requirements for ethics policies and improved internal controls.
The federal government and nonprofit sectors have also strengthened
governance and internal control requirements and practices. As a result,
commonly accepted governance, accountability, and management
practices for federal entities and nonprofit corporations have significantly
evolved in recent years. LSC's authorizing legislation was last
comprehensively reviewed and reauthorized in the Legal Services
Corporation Amendments Act of 1977, and LSC's governing statutes have
undergone only limited changes since then.
Although LSC has stronger federal accountability requirements than many
nonprofit corporations, it is subject to governance and accountability
requirements that are weaker than those of independent federal agencies
headed by boards or commissions and those of U.S. government
corporations. The LSC Act includes provisions providing that LSC shall be
treated like a federal agency for purposes of specified statutes that existed
in the 1970s. In addition, as with federal agencies, virtually all of LSC's
annual revenues come from its annual appropriations from Congress.
Further, with the creation of an OIG within LSC, it is subject to an OIG
governance structure comparable to those of federal agencies and U.S.
government corporations. LSC also submits its budget through the
congressional appropriations process and is subject to other congressional
oversight. In other respects, LSC is not subject to the standard governance
and accountability requirements for federal entities, including provisions
related to performance and financial reporting, internal controls, and
funds control.
The governance practices of LSC's board fall short of the modern practices
employed by boards of nonprofit corporations and public companies. By
updating and strengthening its governance and accountability structures,
LSC can increase assurance that federal funds are spent properly and
effectively in order to meet the needs of grant recipients. The board
members have demonstrated active involvement in LSC through their
regular board meeting attendance and participation. There are several
areas, however, where LSC's governance practices can be strengthened,GAO-07-993 Legal Services Corporation
7Public company is a general term used to refer to a corporation owned by shareholders
whose securities are sold to the general public, typically through the stock exchange, and
governed by the requirements of the securities laws.Page 3
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United States. Government Accountability Office. Legal Services Corporation: Governance and Accountability Practices Need to Be Modernized and Strengthened, report, August 15, 2007; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc297700/m1/7/: accessed April 2, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.